The price of eggs and chicken meat in China fell slightly in November, a result of a scare about melamine contamination and lower prices of China's favorite protein source, pork.
Nationwide, the average retail price for poultry meat was 14.92 yuan (US$2.17) per kilo during November 2008, a decline of 0.53% from 15 yuan per kilo in October, according to the latest data from the state-owned China Animal Agriculture Association (CAAA).
The average egg price nationwide was 7.4 yuan per kilo during November 2008, a drop of 7.8% from 8.03 yuan per kilo in October. It has also showed a significant decline compared to this year’s peak average price of 8.56 yuan per kilo occurred in September, declined by 13.6%.
According to experts, fears of melamine contamination was the main reason for the fall in prices. In Beijing, for example, egg prices fell to 5.2 yuan per kilo – a five-year low.
Since mid 2007, melamine – an industrial chemical that can make products seem to contain more protein than they actually do – has been discovered throughout the Chinese food chain. Melamine contamination was responsible for the deaths of thousands of pets in the U.S. In 2007. More recently, six babies died and 300,000 fell ill from drinking contaminated baby formula, according to Xinhua.
According to the state-owned Xinhua news wire, in October, Hong Kong authorities discovered melamine in several batches of eggs from northeast China. Since then, melamine has been discovered in more eggs from the region. Daily declines in prices reached as high as 0.8 yuan per kilo in the area's provinces, according to a report from Ministry of Agriculture (MOA).
Melamine contamination was also recorded in chicken feed, resulting in fears that the meat was also contaminated, although no melamine has been detected yet.
"After the crisis, we have seen a significant decline in the sales volume of poultry products," said a public relations officer from Henan Dayong Industrial Co. Ltd., which is one of the chicken suppliers for KFC and McDonald's in China.
The officer declined to provide any sales data, and also asked that he not be quoted by name.
According to a report by Song Liping (ED: Song is the family name), an analyst at the Liaoning Poultry Regulating Commission, an examination of 248 random batches of eggs conducted between Oct. 28 and Nov. 7 did not uncover any melamine contamination.
"The influence of the melamine scale will gradually disappear and egg prices will return to normal levels, and so will chicken prices," she predicted.
The other white meat
According to experts, an increase in the supply of pork has resulted in lower prices of this meat in China, traditionally the favorite source of protein in much of the country.
"Because of the replaceable relationship between pork and chicken, a drop in the price of one will inevitably affect the price of the other," Tang Weiliang, an agriculture analyst with Guangzhou-based Guotai Junan Securities, told Poultry International. "If the price of pork does not rebound sharply by the end of the year, the price of chicken price will not change significantly either."
The average Chinese pork price has declined from the peak level of around 20 yuan per kilo few months ago to around 16 yuan per kilo in many areas in November, according to government statistics.
According to Ding Pin, an agriculture analyst from Shanghai-based Haitong Securities, the lower price of pork is due to increased supply. He expects the prices to stay low in the immediate future.
"As the Chinese Spring Festival, approaches, the supply level of pork and poultry will not show a significant change," he told Poultry International.
The Ministry of Agriculture publishes a weekly index measuring producer confidence across the country – and the numbers are not looking good.
In the week ending Nov. 20 – the latest data available – the agriculture market trend index for poultry and egg production in 17 key provinces stood at 50.6. This was the seven consecutive week that the index has declined. At this time last year, the index – which runs from 0 for extremely pessimistic to 100 for extremely optimistic – stood at 57.2.
A score of 50 indicates that the market for poultry was expected to be exactly equal to the supply in the near future.
"We expect the sales for the fourth quarter this year will not show a significant rebound from the third quarter," Gao Zhentao, CEO of Shandong-based Yuhe International said in a statement.
Yuhe is the second largest day-old broiler breeder in China. The company just announced that its total revenue for the third quarter of 2008 equaled US$9.6 million, down 5.6% from US$10.2 million during the same period last year. The decline was attributed to the decrease in sales price of day-old broilers from an average of US$0.63 for the three months ended September 30, 2007 to US$0.37 for the third quarter of 2008.
"The global financial crisis will also impact the consumption for the whole market," Gao said.
But he expected the poultry sales will not see another decline if there is no other crisis.
The latest figures for poultry and egg export volumes are from August, and show a significant decline from the same time last year, which experts attribute to safety concerns and increased processing costs.
According to the Ministry of Commerce, China exported 21,812 tons of chicken products, an increase of 2,638 tons over July – but a drop of 9,502 tons compared to August 2007, a decline of 30.3%.
Prices rose slightly, however. In August 2008, the average export price was US$3,134 a ton, up $177.50 compared to July, and $358 higher than August 2007, an increase of 12.9%.
According to experts, the increase in export prices was due to added spending on quality control and the rising cost of processing and feed.
"The overseas customers haven’t entirely regained their confidence in the safety of Chinese food products, after the series of crises like melamine and bird flu," said Xu Chongji, public relations officer at the Shandong-based cooked chicken meat supplier Zhucheng Foreign Trade Co. Ltd.
Bird flu first hit China hard in 2004, but has recurred every year. This year, five separate breakouts were discovered in Tibet, Guangdong and Guizhou provinces, with 5,000 chickens infected and 260,000 killed.
According to Xu, his company had to raise the price of its cooked poultry meat three times this year, around US$500 per ton each time.
"Importers would rather spend more on quality control than take any risk on the quality of imported poultry products," Xu said. "And Chinese suppliers have been paying more attention to quality control, especially on the control of the sources of live birds and the quality of feed."
As a result of the improved standards, the European Union lifted a six-year ban in – and Zhucheng shipped the first batch, 60 tons of cooked chicken meet, to Belgium on Dec. 5.
"The reopening of the poultry exports to the European Union shows that Chinese poultry products have been able to meet the global requirements for quality," Xu said.
Joint ventures with foreign firms were responsible for 25% of all exports in August, a total of 4,454 tons of poultry product. This was a decline from August 2007, when joint ventures exported 11,679 tons of chicken, or 37% of the total.
Exports by wholly foreign-owned enterprises remained steady at 9% of the total, or 1,941 tons of poultry product in August 2008.